UNIT- 01
Banker and Customer
Meaning of Bank :-
The term Bank refers to a financial institution which deals with deposits and advances and other
related services Bank receive money from those who want to save in the form of deposits and it lends
money to those who needs it
Definition of Bank :-
According to Oxford Dictionary, "a bank is an establishment for custody of money which it is
based out on customer order".
Features of Bank :-
1) Dealing in Money :
It deals with other people’s money that is mainly given by depositors
2) Individual / Firm / Company :
A bank maybe a person firm or a company which is in the business of Banking
3) Acceptance of deposit :
It except money in the form of deposits which is repayable on demand
4) Giving Advances :
A Bank lends money in the form of loans to those who requires it
5) Payment and withdrawal :
Bank provides easy payments Through Apps and withdrawal facility in the form of cheque and
drafts
6) Agency and utility services :
Bank provides various facility to its customer which includes general utility services and
Agency services
7) Profit and service orientation :
A bank is a profit seeking institution having service oriented approach
8) Ever increasing function :
There is a continuous expansion and diversification as regards to the functions , services and
activities of a bank
9) Connecting link :
A bank acts as a Connecting link between Borrower and lenders of money
10) Banking business :
, A bank main business should be into banking which should not be a subsidiary to any
other business
BANKER
Meaning of Banker :-
It refers to a person who carries all the business of Banking which is specified as conducting savings
account , current account or fixed deposits account for his customers , paying cheques drawn on his or
her and collecting cheques for his or her customer
Definition:-
According to Dr B R Herbert hart ,"A banker is one who is in the ordinary course of his business ,
honours , cheques , drawn upon him by persons from and for whom he receives money on current
account".
According to Hansberry’s of law of England, “A banker is in an individual, partnership or
Corporation whose sole business is banking that is the receipt of money or current account or deposit
account and payment of cheques drawn by and collection of checks paid by the customer".
CUSTOMER
Meaning of customer :-
The word customer has been derived from the word custom which means a habit or tendency to
do certain things in a regular or particular manner
A person who has an account in a bank is considered as its customer
Customer is a person who utilizes one or more of the services provided by the bank through
customer the banks gets an opportunity to make earnings and banker provides services
According to Section 1C of Indian Banking Regulation Act 1949 ,"The term banking company refers to
any company which transacts with business of Banking in India".
According to Dr B R Herbert hart ," A customer is one who has account with the banker or whom a
bank habitually undertakes to act as such".
According to Central Bank of India," A customer is a person who has the habit of restorting to the some
place or person to do business ".
Relationship between Banker and Customer
, The relationship between the banker and customer may be classified into two types :
1] General Relationship
2] Special Relationship
1) General Relationship between the banker and Customer :-
a) Debtor and Customer :-
When and customer opens an account with a bank he enters into an agreement with
the banker. Banker becomes debtor and customer becomes a creditor. The bank borrows the money
and it is only when the depositor demands the banker pays.
b) Creditor and Debtor :-
Lending money is the primary activity of the banker. The resources mobilized by banks
are utilized for lending operations .Customer who borrows money from the bank owe money to the
bank .The banker becomes Creditor to the customer and the customer becomes debtors
c) Agent and principle :-
An agent is a person employed to do any act for another or to represent another . It
deals with third person. The person for whom such act is done is called the principle
d) Trustee and beneficiary :-
Trustee is an entity who takes care of Assets and perform certain functions for the gain
or benefit of another person known as beneficiary
e) Pledger and Pledgee :-
This happens when a customer pledges (promises) certain assets or security with the
banker in order to get loan .In this case this customer becomes pledger and banker becomes pledgee
f) Bailor and Bailey:-
Bailment is an contract for delivering goods by one party to another to be held interest
for a specific period. Bailor is a party who delivers property to another , bailee is the party to another
to whom the property is delivered
g) Advisor and client :-
The banker act as an advisor when a customer invest in securities . The banker becomes
an advisor and customer becomes a client
2) Special Relationship
A) Rights of Banker
B) Obligations of the Banker
A) Rights of Banker :-
, It is not that bank has only duties towards its customers but also has certain rights to its
customers they are as follows
1] Right to lien :-
A lien is the right of a creditor in possession of goods, securities or any other asset belonging to
the debtor to retain them until the debt is repaid
It is the right of Banker to take possession of goods, securities till the customer repay back the
loan but not to sell it. There two types of lien
a) Particular lien :-
A Particular lien gives the right to the creditor to retain possession of only those goods in respect of
which dues have arisen its is also termed as ordinary lien.
b) General lien :-
In this lien bank has the right in respect of all dues and not for a particular due . It is the
statutory right of the available in absence of the agreement . It gives the right to the banker to
acquire any type of assets which is there with the borrower
The Banker exercises the right to lien under the following circumstances :
1) Banker has the right of general lien on goods and securities when they are in the name of
borrower
2) Banker can exercise the rights for the dues of the same borrower even after the loan taken
against the particular security
3) Right of general lien can be exercised on bills, cheques, promissory notes, share certificate, bonds,
debenture etc.
4) The banker can exercise lien when the loans are due for repayment
5) The banker has the right of lien on personal account of partners against the loan given to the
partnership firm
2]Rights to set off :-
It is the process of combining 2 or more accounts of the customer . It is the statutory right
available to the Banker to set off debt owned to him by a debtor from the credit balance
The following conditions need to be fulfilled for exercising the rights to set off
Banker and Customer
Meaning of Bank :-
The term Bank refers to a financial institution which deals with deposits and advances and other
related services Bank receive money from those who want to save in the form of deposits and it lends
money to those who needs it
Definition of Bank :-
According to Oxford Dictionary, "a bank is an establishment for custody of money which it is
based out on customer order".
Features of Bank :-
1) Dealing in Money :
It deals with other people’s money that is mainly given by depositors
2) Individual / Firm / Company :
A bank maybe a person firm or a company which is in the business of Banking
3) Acceptance of deposit :
It except money in the form of deposits which is repayable on demand
4) Giving Advances :
A Bank lends money in the form of loans to those who requires it
5) Payment and withdrawal :
Bank provides easy payments Through Apps and withdrawal facility in the form of cheque and
drafts
6) Agency and utility services :
Bank provides various facility to its customer which includes general utility services and
Agency services
7) Profit and service orientation :
A bank is a profit seeking institution having service oriented approach
8) Ever increasing function :
There is a continuous expansion and diversification as regards to the functions , services and
activities of a bank
9) Connecting link :
A bank acts as a Connecting link between Borrower and lenders of money
10) Banking business :
, A bank main business should be into banking which should not be a subsidiary to any
other business
BANKER
Meaning of Banker :-
It refers to a person who carries all the business of Banking which is specified as conducting savings
account , current account or fixed deposits account for his customers , paying cheques drawn on his or
her and collecting cheques for his or her customer
Definition:-
According to Dr B R Herbert hart ,"A banker is one who is in the ordinary course of his business ,
honours , cheques , drawn upon him by persons from and for whom he receives money on current
account".
According to Hansberry’s of law of England, “A banker is in an individual, partnership or
Corporation whose sole business is banking that is the receipt of money or current account or deposit
account and payment of cheques drawn by and collection of checks paid by the customer".
CUSTOMER
Meaning of customer :-
The word customer has been derived from the word custom which means a habit or tendency to
do certain things in a regular or particular manner
A person who has an account in a bank is considered as its customer
Customer is a person who utilizes one or more of the services provided by the bank through
customer the banks gets an opportunity to make earnings and banker provides services
According to Section 1C of Indian Banking Regulation Act 1949 ,"The term banking company refers to
any company which transacts with business of Banking in India".
According to Dr B R Herbert hart ," A customer is one who has account with the banker or whom a
bank habitually undertakes to act as such".
According to Central Bank of India," A customer is a person who has the habit of restorting to the some
place or person to do business ".
Relationship between Banker and Customer
, The relationship between the banker and customer may be classified into two types :
1] General Relationship
2] Special Relationship
1) General Relationship between the banker and Customer :-
a) Debtor and Customer :-
When and customer opens an account with a bank he enters into an agreement with
the banker. Banker becomes debtor and customer becomes a creditor. The bank borrows the money
and it is only when the depositor demands the banker pays.
b) Creditor and Debtor :-
Lending money is the primary activity of the banker. The resources mobilized by banks
are utilized for lending operations .Customer who borrows money from the bank owe money to the
bank .The banker becomes Creditor to the customer and the customer becomes debtors
c) Agent and principle :-
An agent is a person employed to do any act for another or to represent another . It
deals with third person. The person for whom such act is done is called the principle
d) Trustee and beneficiary :-
Trustee is an entity who takes care of Assets and perform certain functions for the gain
or benefit of another person known as beneficiary
e) Pledger and Pledgee :-
This happens when a customer pledges (promises) certain assets or security with the
banker in order to get loan .In this case this customer becomes pledger and banker becomes pledgee
f) Bailor and Bailey:-
Bailment is an contract for delivering goods by one party to another to be held interest
for a specific period. Bailor is a party who delivers property to another , bailee is the party to another
to whom the property is delivered
g) Advisor and client :-
The banker act as an advisor when a customer invest in securities . The banker becomes
an advisor and customer becomes a client
2) Special Relationship
A) Rights of Banker
B) Obligations of the Banker
A) Rights of Banker :-
, It is not that bank has only duties towards its customers but also has certain rights to its
customers they are as follows
1] Right to lien :-
A lien is the right of a creditor in possession of goods, securities or any other asset belonging to
the debtor to retain them until the debt is repaid
It is the right of Banker to take possession of goods, securities till the customer repay back the
loan but not to sell it. There two types of lien
a) Particular lien :-
A Particular lien gives the right to the creditor to retain possession of only those goods in respect of
which dues have arisen its is also termed as ordinary lien.
b) General lien :-
In this lien bank has the right in respect of all dues and not for a particular due . It is the
statutory right of the available in absence of the agreement . It gives the right to the banker to
acquire any type of assets which is there with the borrower
The Banker exercises the right to lien under the following circumstances :
1) Banker has the right of general lien on goods and securities when they are in the name of
borrower
2) Banker can exercise the rights for the dues of the same borrower even after the loan taken
against the particular security
3) Right of general lien can be exercised on bills, cheques, promissory notes, share certificate, bonds,
debenture etc.
4) The banker can exercise lien when the loans are due for repayment
5) The banker has the right of lien on personal account of partners against the loan given to the
partnership firm
2]Rights to set off :-
It is the process of combining 2 or more accounts of the customer . It is the statutory right
available to the Banker to set off debt owned to him by a debtor from the credit balance
The following conditions need to be fulfilled for exercising the rights to set off
